What is in the Democrats’ big bill? Climate, healthcare, savings

Not as robust as the proposal President Joe Biden once envisioned to rebuild America’s public infrastructure and family support systems, Democrats’ compromise on health care, climate change and deficit reduction strategies remains a significant task.

The estimated $740 billion package — passed Sunday by the Senate and on its way to the House — is full of partisan priorities. These include capping prescription drug costs at $2,000 out-of-pocket for seniors, helping Americans pay for private health insurance and what Democrats call the most significant investment in history to fight climate change, about $375 billion over the decade.

Almost half of the money raised, $300 billion, will go to pay down federal deficits.

It’s all largely paid for with new corporate taxes, including a minimum tax of 15% on large companies to ensure they don’t skip paying tax altogether.

Dubbed the “Inflation Reduction Act of 2022,” it’s not at all clear that the 755-page bill will significantly ease inflationary pressures, although millions of Americans are expected to see some relief in health care and other costs.

The vote fell strictly along party lines in the 50-50 Senate, with all Democrats in favor, all Republicans opposed, and Vice President Kamala Harris casting the tie-breaking vote for 51-50 passage. The House is expected to vote by Friday.

A look at what’s in and out of the final package:

LOWER COSTS FOR TRAVEL WRITINGS

Enacting a long-sought goal, the bill would allow the Medicare program to negotiate prescription drug prices with pharmaceutical companies, saving the federal government about $288 billion over the 10-year budget window.

This new revenue will be put back into lower costs for seniors on medications, including a $2,000 out-of-pocket cap for older adults who buy prescriptions from pharmacies.

The money will also be used to provide free vaccinations for seniors, who are now among the few who are not guaranteed free access, according to a summary.

Seniors will also have insulin prices capped at $35 per dose. A provision to extend the price cap on insulin to Americans with private health insurance was not in line with Senate budget rules, and Republicans removed it from the final bill.

HELP TO PAY FOR HEALTH INSURANCE

The bill would expand subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.

Under previous pandemic aid, the extra aid was set to expire this year. But the bill would allow the aid to continue for three more years and lower insurance premiums for people who buy their own health care.

‘ENGLISH LARGEST INVESTMENT IN CLIMATE CHANGE IN US HISTORY’

The bill would invest nearly $375 billion over the decade in strategies to combat climate change, including investments in renewable energy generation and tax credits for consumers to buy new or used electric vehicles.

It’s broken down to include $60 billion for a clean energy production tax credit and $30 billion for a wind and solar production tax credit, seen as ways to boost and support industries that could help curb the nation’s reliance on fossil fuel. The bill also provides tax credits for nuclear power and carbon capture technologies that oil companies such as Exxon Mobil have invested millions of dollars to promote.

The bill would impose a new fee on excess methane emissions from oil and gas drilling, while also giving fossil fuel companies access to more leases on federal lands and waters.

A late addition pushed by Sen. Kyrsten Sinema, D-Ariz., and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to combat a megadrought in the West, including conservation efforts in the Colorado River Basin, on which nearly 40 million Americans depend of drinking water.

For consumers, there are tax breaks as incentives to go green. One is a 10-year consumer tax credit for investments in renewable energy in wind and solar. There are tax breaks for the purchase of electric vehicles, including a tax credit of $4,000 for the purchase of used electric vehicles and $7,500 for new ones.

All told, Democrats believe the strategy could put the country on track to cut greenhouse gas emissions by 40% by 2030, and “would represent by far the largest climate investment in US history.”

HOW TO PAY FOR ALL THIS?

The biggest revenue raiser in the bill is a new minimum tax of 15% on companies making more than $1 billion in annual profits.

It’s a way to crack down on some 200 US companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no tax at all.

The new corporate minimum tax will kick in after the 2022 tax year and raise about $258 billion over the decade.

Revenue would have been $313 billion, but Sinema insisted on one change to the 15% corporate minimum, which allowed a depreciation deduction used by manufacturing industries. That shaves about $55 billion off the total revenue.

To win over Sinema, Democrats dropped plans to close a tax loophole long enjoyed by wealthier Americans — so-called carried interest, which under current law taxes wealthy hedge fund managers and others at a 20% rate.

The left has tried for years to increase the tax rate for carrying interest, increased to 37% in the original bill, more in line with upper income earners. Sinema would not allow it.

Keeping the tax cut for the wealthy deprives the party of $14 billion in revenue it counted on to pay for the package.

Instead, with Sinema’s nod, Democrats will impose a 1% tax on stock buybacks, raising about $74 billion over the decade.

Money is also collected by increasing tax authorities to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is estimated to raise $203 billion in new revenue—a net gain of $124 billion over the decade.

The bill sticks to Biden’s original promise not to raise taxes on families or businesses making less than $400,000 a year.

The lower drug prices for seniors are paid for with savings from Medicare’s negotiations with drug companies.

EXTRA MONEY TO PAY DOWN UNDER

With about $740 billion in new revenue and about $440 billion in new investments, the bill promises to put the difference of about $300 billion toward deficit reduction.

Federal deficits ballooned during the COVID-19 pandemic as federal spending rose and tax revenues fell as the nation’s economy spun through shutdowns, office closures and other massive changes.

The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which released a new report this week on long-term projections.

WHAT IS BEHIND?

This latest package emerged suddenly in late July after 18 months of stop-and-go negotiations leaving behind many of Biden’s more ambitious goals.

Senate Majority Leader Chuck Schumer, D-N.Y., struck a deal with Sen. Joe Manchin to revive Biden’s package, slimming it down to bring the West Virginia Democrat back to the negotiating table. Then they drew Sinema, the remaining party, with further changes.

The package remains robust, by typical standards, but nowhere near the sweeping Build Back Better program Biden once envisioned.

While Congress passed a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that Biden signed into law last year, the president’s and his party’s other key priorities have slipped.

Among them is a continuation of a $300 monthly child tax credit that sent money directly to families during the pandemic and is believed to have greatly reduced child poverty.

Also gone for now are plans for free daycare and community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other essential needs.

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Associated Press writer Matthew Daly contributed to this report.

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